Canada’s banks still lag in money-laundering defenses
Canada’s exclusion from the Financial Action Task Force’s grey list does not mean its bank oversight meets global standards. The FATF’s latest review downgraded Canada’s financial institution supervision from largely compliant to partially compliant, signaling ongoing enforcement weaknesses. This assessment follows a full evaluation of Canada’s anti-money-laundering framework, the first since 2016, and reveals gaps that could expose the system to further risks.
The report identifies critical shortcomings in how Canada’s regulator, the Financial Transactions and Reports Analysis Centre (Fintrac), monitors banks. While the number of businesses required to report suspicious transactions has risen, Fintrac’s supervisory workforce has not expanded proportionally. The review also found that Fintrac does not always focus audits on high-risk banking activities, leaving potential vulnerabilities unchecked. These issues persist despite improvements in transparency around beneficial ownership, financial intelligence sharing, and sanctions enforcement since the last evaluation.
Canada’s legal and financial systems face additional scrutiny. The FATF criticized law societies for failing to enforce money-laundering controls and called for a central registry of bank accounts to track sanctioned individuals. The report also recommended expanding tools to seize criminal assets and licensing precious-metals dealers, measures that would tighten oversight in high-risk sectors. The FATF says Canada should beef up its resources, especially for its teams supervising banks and crypto businesses.
High-profile cases have drawn attention to Canada’s money-laundering risks. In 2024, TD Bank faced a $3 billion penalty for allowing drug cartel transactions in the U.S., a failure that showed systemic weaknesses. In April, the House of Commons completed the first reading of legislation outlining the powers of the new Financial Crimes Agency (FCA), which will be tasked with fighting serious financial offences. Fintrac has also increased financial penalties against companies violating anti-money-laundering rules, though the FATF argues more must be done to close enforcement gaps.
The economic stakes for Canada are significant. A 2021 IMF study found that grey-listed countries experience a 7.6% annual drop in capital inflows relative to GDP, making it harder to attract foreign investment. For Canada, which depends on investment for major infrastructure projects, such a decline would be particularly damaging, especially as it seeks to reduce reliance on the U.S. amid trade tensions.
